It has not been an easy time to invest in ASX lithium stocks.
Unless you were shorting them, lithium investors are likely to be nursing sizeable paper losses over the last 12 months.
During this time, lithium stocks such as Arcadium Lithium (ASX: LTM), Core Lithium Ltd (ASX: CXO), IGO Ltd (ASX: IGO), Liontown Resources Ltd (ASX: LTR), and Pilbara Minerals Ltd (ASX: PLS) have all dropped materially.
This has been driven by significant lithium price weakness caused by the oversupply of the white metal, softer than expected demand, and the emergence of low cost lepidolite in China.
Weak lithium prices are squeezing the profits of lithium miners and making some unprofitable. It was for the latter reason that Core Lithium decided to suspend its mining operations indefinitely earlier this year.
But what's next for lithium prices?
Let's take a look and see what analysts at Goldman Sachs are forecasting for three widely used lithium types. These are lithium carbonate, lithium spodumene, and lithium hydroxide.
Lithium prices
To begin with, let's look at what lithium prices were commanding on average during 2023.
- Lithium carbonate – China: US$32,694 per tonne
- Lithium hydroxide – China: US$32,452 per tonne
- Spodumene 6%: US$3,712 per tonne
Now, let's have a quick look at the current spot prices of these metals compared to what they were commanding back in January. The current prices are as follows:
- Lithium carbonate – China: US$10,934 per tonne (January: US$11,867)
- Lithium hydroxide – China: US$9,563 per tonne (January: US$9,899)
- Spodumene 6%: US$990 per tonne (January: US$1,000)
Lithium forecasts through to 2027
Unfortunately for investors of ASX lithium stocks, Goldman Sachs is not expecting a meaningful improvement in lithium prices in the coming years.
Lithium carbonate – China:
For lithium carbonate, the broker is forecasting the following average price through to 2027 and then for the long term:
- 2024: US$11,683 per tonne
- 2025: US$11,000 per tonne
- 2026: US$13,323 per tonne
- 2027: US$15,646 per tonne
- Long-term: US$15,500 per tonne
Lithium hydroxide – China:
For lithium hydroxide, the broker is forecasting the following:
- 2024: US$11,463 per tonne
- 2025: US$12,500 per tonne
- 2026: US$14,323 per tonne
- 2027: US$16,146 per tonne
- Long-term: US$15,500 per tonne
Spodumene 6%:
Finally, the broker is expecting spodumene prices to remain significantly lower than 2023 averages for the foreseeable future. It has pencilled in the following for the coming years:
- 2024: US$995 per tonne
- 2025: US$800 per tonne
- 2026: US$978 per tonne
- 2027: US$1,155 per tonne
- Long-term: US$1,150 per tonne
Final word
In light of the above, it seems that only ASX lithium stocks with low costs will be in a position to run profitable operations in the coming years.
It is largely for this reason that Goldman has a buy rating and $7.15 price target on IGO's shares. It recently said:
We reiterate our belief that further Greenbushes expansion remains one of the most economically compelling brownfield lithium projects, where the JV also retains significant optionality around extending/converting the TRP, while the resource likely underpins even further expansion (i.e. CGP5, subject to market conditions).
